Transparency and Monetary Policy Effectiveness

Romain Baeriswyl and Camille Cornand
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Romain Baeriswyl: Swiss National Bank - Swiss National Bank

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Abstract: This article analyses the effects of economic transparency on the optimal monetary policy in an economy affected by demand shocks. In an environment of imperfect common knowledge, demand shocks create a trade-off between stabilising the price level and stabilising the output gap. The monetary policy implemented by the central bank tends, on the one hand, to offset demand shocks but, on the other hand, to distort the economy because of its mistaken view of the fundamental state of the economy. Transparency is optimal as long as the central bank does not weight the stabilisation of the output gap too heavily in its objective function.

Keywords: Information; monetary policy; transparency; information; D82 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00651028v2
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Citations: View citations in EconPapers (6)

Published in Annales d'Economie et de Statistique, 2011, 103-104, pp. 165-184

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Journal Article: Transparency and Monetary Policy Effectiveness (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00651028

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